Interest rate rise ‘would hurt one in six companies’

ONE in six businesses in the North of England (17%) would face financial difficulty if interest rates rose by a percentage point or more, according to the latest Business Distress Index from insolvency trade body R3.

The survey also found that 3% of businesses – equivalent to 11,000 companies – would struggle to repay their debts.

However, the vast majority (77%) say they would be unaffected by an interest rate rise. The number of businesses saying they would struggle after a rate rise fell from 29% last year, but fewer expect to benefit too – just 2% compared to 11% last year.

R3’s Business Distress Index is a long-running survey of business concerns and growth prospects carried out by BDRC Continental.

Richard Wolff, North West chair of R3 and head of corporate recovery and insolvency at law firm JMW, said: “It is encouraging that so many businesses feel they would be able to brush off an interest rate rise.

“However, although it may not affect them directly, it would nonetheless affect customers. Higher borrowing costs mean consumers would spend more on their mortgages and maybe save more and therefore have less disposable income.

“While it’s positive that the share of businesses that would struggle after a rate rise is falling, this still represents a substantial amount of businesses and jobs that could be put in difficulty.

“Although businesses have had plenty of headwinds to cope with since the recession, record low interest rates have been a real boost. Rising rates will be a real test for some businesses.”